Vietnam's local currency bond market has seen the fastest growth in Asia as emerging regional markets show great resilience amid a weakening global economy, says a new Asian Development Bank report.

According to ADB's Asia Capital Markets Monitor, the year-on-year growth of Asia's major bond markets were robust in 2009 and 2010, before easing in early 2011. However, the bond markets in Vietnam and Malaysia experienced a significant rise.

"With only US$16.0 billion of total bonds outstanding, Vietnam's local currency bond market grew 42.8 percent year-on-year in Q1 2011 after expanding 34.2 percent in 2010, making it the fastest-growing bond market in Asia since the end of 2009," the report said last week.

But ADB noted that the market is among the region's smallest as it equaled only 15.8 percent of the country's GDP at the end of the first quarter. That compares to a ratio of 111.4 percent for South Korea.

The Manila-based bank also said the corporate bond market of Vietnam in particular grew by an impressive 28.8 percent in the first quarter compared to the same period last year. Between the end of December 2010 and the end of June 2011, government bond yields rose for all maturities, due to accelerating inflation, it added.

The Asia Capital Markets Monitor is ADB's annual assessment of the performance and outlook for the region's equity, bond and currency markets, covering 11 emerging markets.

The report said the global financial environment has become more volatile in recent months. "While emerging Asia's markets have not been immune to these developments, the region's strong fundamentals and interest rate differentials with advanced economies are expected to reignite capital inflows to the region later this year," it said.

However, emerging Asian markets remain vulnerable to abrupt changes in global investor sentiment, said Iwan Azis, Head of ADB's Office of Regional Economic Integration, which prepared the report.

"The knock-on effects from events in the US and Europe will go far beyond portfolio returns, as a weakening global economy will hurt our exports," Azis said.